1. Field of the Invention
The present invention generally relates to online advertising systems and methods, and more particularly to a system and method for performance-based online advertising.
2. Discussion of the Background
In recent years, methods, such as Cost-Per-1,000 (CPM), Cost-Per-Click (CPC), and the like, have been developed for calculating charges for advertising online. The CPM method is a holdover from traditional media advertising and typically is an unreliable, underperforming, administratively burdensome and untargeted format for advertisers seeking to maximize Return-On-Investment (ROI) for online advertising campaigns. For example, the CPM method charges advertisers based solely on the number of times the advertisement is delivered on a Web page (i.e., the number of impressions). The CPM method has typically been sold on the basis of delivering traffic and branding.
The CPC method charges for advertisements based on a cost associated with each selection of or click on an advertisement. CPC is a much more accountable means of developing a price for an advertisement, such as a keyword listing, text link, phrase, banner, button, pop-up or pop-under. The CPC format charges advertisers based on the volume of end users that click on the target advertisement, where the Click-Through Rate (CTR) for the advertisement is given by the number of clicks divided by the number of impressions. Unlike the CPM format, the CPC format has not typically been sold with any premium built in for advertiser branding.
However, online advertisers have become very focused on ROI and on minimizing financial risk. Accordingly, a growing percentage of advertisers employ software tools and operational capability to track ROI on a real-time basis. As a result, the online advertising market has evolved from a largely impression-based CPM medium, where, for example, an advertiser pays for exposure, including bulk advertising purchases, to a performance-based medium, such as a CPC campaign, where an advertiser pays for end-user click-throughs to a destination site. As a result of this evolution, average advertiser ROI for online campaigns has risen for advertisers who use CPM-based and CPC-based campaigns.
Based on the higher targeted ROI potential of CPC campaigns, acquisition costs, and ROI measurement, CPC advertising has captured an increasing percentage of the advertising dollars from the CPM market. However, while CPC campaigns offer advertisers higher targeted ROI than CPM campaigns, such campaigns create challenges for advertisers. For example, an advertiser that enters into a CPC campaign must actively monitor the performance of such campaigns, carefully scrutinizing the quality of referred users, spending habits of referred users, the resulting conversion rates from any particular click source, and the daily, weekly and monthly amounts the advertiser has agreed to pay for particular keywords, phrases, text links, advertisement placements, etc. Accordingly, it is an ongoing challenge for advertisers using CPM and CPC campaigns to monitor the campaigns and translate the CPM or CPC costs into a Cost-Per-Acquisition (CPA), and compare the various net CPA numbers across the dozens or sometimes hundreds of parallel campaigns that they may be running at any given time. This ongoing analysis leads to more work on the part of the advertiser to respond to variances in the performance and the cost of such campaigns, and in adjusting the CPM or CPC as necessary on a regular or sometimes daily or even real-time basis.